Farmers Group

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Agriculture Fruit Farm Business Plan

Financial Plan Summary

The following topics and tables outline our financial plan.

8.1 Start-up Funding

Funding Requirements and Uses

The company is seeking to raise of $830,000 for the purpose of financing the acquisition of the Green Acres Vegetable Farm and Mobile Farmers Vegetable Farm, facilities modifications, equipment, and funding operating expenses. Another $1,000,000 will be invested in the company by its four co-owners. The following is a breakdown of how the funds will be used:

Breakdown of Use of Funds
Acquisition:
Property

$1,300,000

Equipment System

$400,000

Sub-total

$1,700,000

Operating Expenses:
Salaries

$80,000

Marketing and promotion

$10,000

Other operating expenses

$10,000

Sub-total

$100,000

Total

$1,800,000

Start-up Funding
Start-up Expenses to Fund $684,600
Start-up Assets to Fund $1,145,400
Total Funding Required $1,830,000
Assets
Non-cash Assets from Start-up $900,000
Cash Requirements from Start-up $245,400
Additional Cash Raised $0
Cash Balance on Starting Date $245,400
Total Assets $1,145,400
Liabilities and Capital
Liabilities
Current Borrowing $400,000
Long-term Liabilities $400,000
Accounts Payable (Outstanding Bills) $30,000
Other Current Liabilities (interest-free) $0
Total Liabilities $830,000
Capital
Planned Investment
Investor 1 $250,000
Investor 2 $250,000
Investor 3 $250,000
Investor 4 $250,000
Other $0
Additional Investment Requirement $0
Total Planned Investment $1,000,000
Loss at Start-up (Start-up Expenses) ($684,600)
Total Capital $315,400
Total Capital and Liabilities $1,145,400
Total Funding $1,830,000

8.2 Important Assumptions

Nature and Limitation of Projections

This financial projection is based on sales volume at the levels described in the sales forecast section and presents, to the best of management's knowledge, the company's expected assets, liabilities, capital, and revenues and expenses. The projections reflect management's judgement of the expected conditions and its expected course of action given the hypothetical assumptions.

Nature of Operations

The company is in the business of vegetable farming, greens cultivation, and composting. The company expects to be operating in 2000.

Revenues

The company's revenue is derived primarily from the sale of vegetables, strawberries, and bagged composted manure products.

Expenses

The company's expenses are primarily those of salaries, utilities, and insurance costs. Other expenses are based on management's estimates and industry averages.

General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 7.00% 7.00% 7.00% 7.00% 7.00%
Long-term Interest Rate 7.00% 7.00% 7.00% 7.00% 7.00%
Tax Rate 20.83% 20.00% 20.83% 20.00% 20.83%
Other 0 0 0 0 0

8.3 Break-even Analysis

The company's break-even analysis is given below.

Break-even Analysis
Monthly Revenue Break-even $36,974
Assumptions:
Average Percent Variable Cost 68%
Estimated Monthly Fixed Cost $11,832

8.4 Projected Profit and Loss

As the profit and loss table shows, Farmers Group expects a steady growth in profitability over the next few years.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $575,000 $700,000 $850,000 $889,100 $927,331
Direct Cost of Sales $391,000 $478,100 $578,850 $601,032 $627,803
Other $10,000 $10,000 $10,000 $10,000 $10,000
Total Cost of Sales $401,000 $488,100 $588,850 $611,032 $637,803
Gross Margin $174,000 $211,900 $261,150 $278,068 $289,528
Gross Margin % 30.26% 30.27% 30.72% 31.28% 31.22%
Expenses
Payroll $117,500 $111,000 $111,000 $111,000 $111,000
Sales and Marketing and Other Expenses $11,400 $11,100 $16,550 $15,300 $17,550
Depreciation $0 $0 $0 $0 $0
Gas and Oil $2,040 $3,000 $3,000 $3,000 $3,000
Utilities $6,000 $6,000 $6,000 $6,000 $6,000
Insurance $5,040 $5,500 $5,500 $5,500 $5,500
Payroll Taxes $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0
Total Operating Expenses $141,980 $136,600 $142,050 $140,800 $143,050
Profit Before Interest and Taxes $32,020 $75,300 $119,100 $137,268 $146,478
EBITDA $32,020 $75,300 $119,100 $137,268 $146,478
Interest Expense $54,664 $47,845 $39,095 $32,095 $26,495
Taxes Incurred $0 $5,491 $16,668 $21,035 $24,996
Net Profit ($22,644) $21,964 $63,337 $84,139 $94,987
Net Profit/Sales -3.94% 3.14% 7.45% 9.46% 10.24%

8.5 Projected Cash Flow

The chart and table below contain the cash flow assumptions and projections for Farmers Group during the first five years of plan implementation. Year 1 monthlies are presented in the appendix.

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $143,750 $175,000 $212,500 $222,275 $231,833
Cash from Receivables $431,250 $525,000 $637,500 $666,825 $695,498
Subtotal Cash from Operations $575,000 $700,000 $850,000 $889,100 $927,331
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $97,000 $0 $0
Subtotal Cash Received $575,000 $700,000 $947,000 $889,100 $927,331
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $117,500 $111,000 $111,000 $111,000 $111,000
Bill Payments $408,920 $498,803 $668,927 $694,140 $720,435
Subtotal Spent on Operations $526,420 $609,803 $779,927 $805,140 $831,435
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $54,000 $100,000 $100,000 $25,000 $35,000
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $0 $25,000 $25,000 $50,000 $50,000
Purchase Other Current Assets $0 $0 $0 $0 $20,000
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $25,000 $20,000 $10,000 $10,000
Subtotal Cash Spent $580,420 $759,803 $924,927 $890,140 $946,435
Net Cash Flow ($5,420) ($59,803) $22,073 ($1,040) ($19,104)
Cash Balance $239,980 $180,177 $202,250 $201,210 $182,106

8.6 Projected Balance Sheet

We project solid cash balance and net worth over the years of the plan.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $239,980 $180,177 $202,250 $201,210 $182,106
Accounts Receivable $0 $0 $0 $0 $0
Inventory $55,760 $24,586 $29,767 $31,136 $32,475
Other Current Assets $250,000 $250,000 $250,000 $250,000 $270,000
Total Current Assets $545,740 $454,763 $482,017 $482,346 $484,581
Long-term Assets
Long-term Assets $500,000 $500,000 $500,000 $500,000 $500,000
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $500,000 $500,000 $500,000 $500,000 $500,000
Total Assets $1,045,740 $954,763 $982,017 $982,346 $984,581
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $6,984 $44,043 $55,960 $57,150 $59,399
Current Borrowing $346,000 $246,000 $146,000 $121,000 $86,000
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $352,984 $290,043 $201,960 $178,150 $145,399
Long-term Liabilities $400,000 $375,000 $350,000 $300,000 $250,000
Total Liabilities $752,984 $665,043 $551,960 $478,150 $395,399
Paid-in Capital $1,000,000 $1,000,000 $1,097,000 $1,097,000 $1,097,000
Retained Earnings ($684,600) ($732,244) ($730,280) ($676,943) ($602,804)
Earnings ($22,644) $21,964 $63,337 $84,139 $94,987
Total Capital $292,756 $289,720 $430,057 $504,196 $589,182
Total Liabilities and Capital $1,045,740 $954,763 $982,017 $982,346 $984,581
Net Worth $292,756 $289,720 $430,057 $504,196 $589,182

8.7 Business Ratios

The business ratios given below are contrasted to industry standards for SIC code 0161 which covers vegetable and melon growers. Within this category, research has shown that there can be significant deviations from industry standards due to farm size, product life cycle, and capital resources.

Farmers Group is a start-up venture, and therefore has a more heavy debt to equity ratio than most existing farms. Furthermore, due to its move into a niche market, the company is expected to spend more on advertising than its competitors. The first two years of operations are expected also to have a higher growth rate than average as it gains market share.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 21.74% 21.43% 4.60% 4.30% -4.60%
Percent of Total Assets
Accounts Receivable 0.00% 0.00% 0.00% 0.00% 0.00% 12.90%
Inventory 5.33% 2.58% 3.03% 3.17% 3.30% 14.40%
Other Current Assets 23.91% 26.18% 25.46% 25.45% 27.42% 28.90%
Total Current Assets 52.19% 47.63% 49.08% 49.10% 49.22% 56.20%
Long-term Assets 47.81% 52.37% 50.92% 50.90% 50.78% 43.80%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 33.75% 30.38% 20.57% 18.14% 14.77% 31.10%
Long-term Liabilities 38.25% 39.28% 35.64% 30.54% 25.39% 20.50%
Total Liabilities 72.00% 69.66% 56.21% 48.67% 40.16% 51.60%
Net Worth 28.00% 30.34% 43.79% 51.33% 59.84% 48.40%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 30.26% 30.27% 30.72% 31.28% 31.22% 32.00%
Selling, General & Administrative Expenses 37.26% 29.04% 24.76% 23.31% 22.31% 20.70%
Advertising Expenses 0.83% 0.71% 1.23% 1.20% 1.23% 0.20%
Profit Before Interest and Taxes 5.57% 10.76% 14.01% 15.44% 15.80% 1.70%
Main Ratios
Current 1.55 1.57 2.39 2.71 3.33 1.65
Quick 1.39 1.48 2.24 2.53 3.11 0.88
Total Debt to Total Assets 72.00% 69.66% 56.21% 48.67% 40.16% 51.60%
Pre-tax Return on Net Worth -7.73% 9.48% 18.60% 20.86% 20.36% 2.20%
Pre-tax Return on Assets -2.17% 2.88% 8.15% 10.71% 12.19% 4.50%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin -3.94% 3.14% 7.45% 9.46% 10.24% n.a
Return on Equity -7.73% 7.58% 14.73% 16.69% 16.12% n.a
Activity Ratios
Accounts Receivable Turnover 0.00 0.00 0.00 0.00 0.00 n.a
Collection Days 60 0 0 0 0 n.a
Inventory Turnover 3.93 11.90 21.30 19.74 19.74 n.a
Accounts Payable Turnover 55.25 12.17 12.17 12.17 12.17 n.a
Payment Days 29 17 27 30 29 n.a
Total Asset Turnover 0.55 0.73 0.87 0.91 0.94 n.a
Debt Ratios
Debt to Net Worth 2.57 2.30 1.28 0.95 0.67 n.a
Current Liab. to Liab. 0.47 0.44 0.37 0.37 0.37 n.a
Liquidity Ratios
Net Working Capital $192,756 $164,720 $280,057 $304,196 $339,182 n.a
Interest Coverage 0.59 1.57 3.05 4.28 5.53 n.a
Additional Ratios
Assets to Sales 1.82 1.36 1.16 1.10 1.06 n.a
Current Debt/Total Assets 34% 30% 21% 18% 15% n.a
Acid Test 1.39 1.48 2.24 2.53 3.11 n.a
Sales/Net Worth 1.96 2.42 1.98 1.76 1.57 n.a
Dividend Payout 0.00 1.14 0.32 0.12 0.11 n.a